Best Affirms Workers Comp Reinsurer Eastern Re’s ‘A-‘ Ratings

A.M. Best Co. has affirmed the financial strength rating of ‘A-‘ (Excellent) and issuer credit rating of “a-” of Cayman Islands-based Eastern Re Ltd. S.P.C., both with stable outlooks.

The ratings recognize Eastern Re’s “strategic affiliation with the holding company, Eastern Insurance Holdings, Inc. (EIHI)], its historically profitable operating results as well as its sound stand-alone capitalization,” Best explained.

As offsetting factors, Best cited Eastern Re’s “exclusive reliance on EIHI for production of all of its business, as well as the mono-line orientation of Eastern Re, which primarily acts as a workers’ compensation reinsurer.”

Best pointed out that “Eastern Re is a segregated portfolio company, or cell captive, whose general cell is a wholly owned subsidiary of EIHI, which also indirectly owns Eastern Alliance Insurance Company, Allied Eastern Indemnity Company and Eastern Advantage Assurance Company, all Pennsylvania-domiciled workers’ compensation insurance companies that produce business through regional agents.

“These insurance companies, which are the non-life risk-bearing entities of EIHI, provide both fronting capabilities and reinsurance protection to Eastern Re. Eastern Re also utilizes the expertise of Employers Alliance Inc., a Pennsylvania-domiciled insurance services provider that acts as the third party administrator and provides services for all of the cells of Eastern Re.

“Eastern Re issues preferred shares to 15 cell owners, which are agent or group captives that purchase workers’ compensation coverage from EIHI.

“These agent and group captives participate in the profits and losses of the cell for which they are the owners. This dynamic provides added incentive to the agent or group captive to prevent adverse selection for the business being assumed by Eastern Re.

Source: A.M. Best